The pragmatism is welcome. Insisting on rigid power prices, never mind rising cost of fuel due to dearer coal or gas, would short-circuit the market for power. But in tandem, what is also required is to extend the new norms for existing power projects under implementation that have encountered hike in fuel costs post financial closure, like those at Mundra or Krishnapatnam.

The point is that the current policy of tariff-based competitive bidding does need to be tweaked to factor in, say, force majeure events such as tax and regulatory changes abroad that hike the cost of imported coal.

Now, tariff-based bids, with power price as the sole criteria for bidder selection, are clearly transparent and have led to several ultra mega-projects getting off the ground. Yet, mandating that producers stick to bid prices despite unforeseen hikes in fuel costs would make entire projects unviable. Without scope for price revision, markets would simply close down.

That said, we do need competitive prices in power to boost demand in the backdrop of widespread energy poverty. Hence the need for proper regulatory oversight to bring about merit-order dispatch, so that least-cost power producers are given preferential wheeling rights in regional load centres.

Concurrently, we need to mandate open access to line capacity, so that multiple producers can seek custom at competitive rates. The Electricity Act, 2003, does have provision for power consumers beyond a reasonable load to be able to select their distributors and the law needs to be enforced.

Additionally, increased exchanged-traded power should improve disclosure and result in better price discovery. It is notable that power generation capacity added last fiscal was greater than that put up in the entire 10th Five-Year Plan (2002-07) period. But in parallel, distribution reforms need expediting so that horrendous revenue losses of state power utilities turn history.